Greening the supply chain can increase profitability

There are signs that the US is now at last beginning to follow Europes lead in encouraging more eco-friendly supply chain management strategies.

Manufacturing & Logistics IT spoke with Logility about its own perceptions of this positive sea change, and how a green stance can also improve a companys bottom line through facilitating improved efficiencies and cost savings.

Companies are moving beyond thinking about a green supply chain and are setting specific goals and investing in initiatives to improve supply chain operations with a more eco-conscious approach. This is the view of Mike Edenfield, president and CEO, of Logility. Europe may have a sizeable head start over the US with regard to embracing sustainability programmes, but, as Karin Bursa, Logilitys vice president of marketing, observes, the US is now keen to follow suit. Were now seeing many multi-national companies headquartered in the US, as well as Europe-based companies, putting specific plans in place to increase their involvement with green initiatives and to increase their sustainability plans to the extent that theyre even re-designing products to be more sustainable in nature, she said.

Demand shift

Ron Burnette, Logilitys product director, maintains that, when most people think of green or sustainability programmes, they mainly think about manufacturing processes, improving efficiencies and reducing waste, etc. around transportation. What we are trying to do is put the focus on the entire supply chain; for example, how companies manage the demand as its changing from its more traditional-type products to more green or eco-friendly type products, he said. Theres going to be a shift in demand that companies need to manage and make sure they dont sit with a lot of inventory related to the more traditional products. Burnette added that companies should also consider whether they have enough of the new type of products so that when they start to sell they can be early to market and gain favourable market share, as well as entering into the whole mindset of the benefits of sustainability. The US has lagged behind in the sustainability area, but were starting to see more initiatives from our customers and the whole supply chain is involved, he pointed out.

Bursa believes there are three main macro drivers to sustainability programmes. The first is resource availability; the second is regulation and the US is legislating more now with regard to sustainability; and the third is reputation, which I think is really where Europe has led other geographical regions in terms of promoting the benefits of being green and being environmentally conscious, she said. Now, more companies are also realising that there is money to be made in being green. They are also realising that there are opportunities in their supply chain operations to better optimise the resources that theyre using and there are a number of steps that they can take.

Bursa points out that, in the consumer goods sector for example, Walmart has been active in rolling out what it calls its 360 Programme. It is requiring significant reductions in packaging and waste from its suppliers, and I think that this has driven some companies to re-evaluate at least the packaging of their products, she said. Bursa believes policies such as that of Walmart could also encourage supplier organisations to look at inputting more environmentally friendly ingredients for product manufacturer wherever possible.

Optimising global supply chain management

And how can software help facilitate a more eco-friendly supply chain strategy? Supply chain software systems such as Logilitys own Voyager Solutions can help companies advance sustainability objectives while also maximising supply chain efficiencies to achieve and maintain a competitive advantage. In the case of Voyager, it is claimed to be able to support sustainability efforts by optimising global supply chain management in a number of ways, including: improving forecasting for new product introductions that are focused on environmentally friendly products; planning the roll-out of enhanced packaging that minimises waste and includes recycled materials; reducing inventories by quickly sensing changes in consumer demand and synchronising market demand with production goals; increasing manufacturing efficiency by optimising changeovers and tracking specific green Key Performance Indicators (KPIs) featured within Logility Voyager Solutions; and modelling complex supply chain networks to better plan production and distribution.

Systems such as Voyager can also enable companies to go green by improving transportation planning and management, which leads to reduced fuel consumption and lower emissions. With such a state-of-the-art Supply Chain Management solution, companies can more efficiently and cost-effectively plan distribution routes with suppliers and customers; maximise capacity and move full containers; consolidate multiple customer orders and eliminate expedited and extra shipping costs for on-time delivery while honouring customer delivery dates.

Sustainability efforts have certainly changed the way companies look at their global supply chain operations and Logility Voyager Solutions provides the flexibility to model a variety of factors and support better decision-making as each enterprise navigates through specific sustainability initiatives, said Edenfield. Logility Voyager Solutions help our customers plan multiple scenarios, visualise the trade-offs and merits of each plan and implement the best plan for both their business and the environment.

Logility recently participated in an APICS vendor webcast, Thinking about a Green Supply Chain with John Davies, vice president, sustainability forum, AMR Research. To access the on-demand replay of the webcast and learn more about integrating green initiatives into your supply chain, visit www.logility.com/greensupplychain

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Established in 1997, Manufacturing & Logistics IT Magazine (LogisticsIT.com) is the leading specialist IT solutions magazine and web-site covering all aspects of end-to-end supply chains within a wide range of vertical markets. The editorial content covers real live applications within collaborative supply chain environments and has contribution from leading vendors and research analysts. This provides our readers with an insight into how technological developments enable all kinds of businesses to operate effectively and efficiently.